Prime abruptly stops billing for rare ailment

Hospitals including Paradise Valley in National City see drop in Medicare charges

Story by

Lance Williams, Stephen K Doig

After billing Medicare for treating more than 1,100 cases of a rare affliction, a Prime Healthcare Services hospital in Redding abruptly stopped last year, state health records show. The change occurred soon after California Watch published a story about aggressive billing practices at the hospital.

About six months after it took control of the Shasta Regional Medical Center in Redding in late 2008, Prime began billing Medicare for treating senior citizens it diagnosed with kwashiorkor, a dangerous nutritional disorder usually seen among children during famines in developing countries. At its height, the hospital's billing for the malady surged to nearly 70 times the state average.

The previous high rates of kwashiorkor diagnoses made the hospital eligible for about $6,000 in Medicare bonus payments for each of the more than 1,100 cases of kwashiorkor it reported over a two-year period, according to federal records. That’s $6.9 million in all.

Prime said in a statement that its Medicare billings are legal and accurate. It declined to respond to follow-up questions.

Other hospitals in the Prime Healthcare chain also have geared back on billing Medicare for treating kwashiorkor, according to California Watch’s analysis of data from the Office of Statewide Health Planning and Development, which details Medicare cases at general hospitals in California.

Nine Prime hospitals that previously had billed Medicare for treating kwashiorkor reported no cases in 2011. Only one reported an increase: Garden Grove Hospital Medical Center in Orange County reported 28 cases in 2010. In 2011, it increased to 58 cases, 3.3 percent of its Medicare patients.

An expert on Medicare fraud said the sudden drop in kwashiorkor billings strongly suggests they were incorrect to begin with.

“Obviously, they felt the heat from the story, and obviously they decided to clean up their act,” said Jamie Bennett, a lawyer at the Maryland firm Ashcraft & Gerel, who investigated Medicare billing fraud during 20 years as a federal prosecutor.

“Someone told (the hospital) the billings were incorrect and they stopped – it’s the only explanation,” Bennett said.

In its statement, Prime said the drop in reports of kwashiorkor was the result of "certain changes in Medicare coding guidelines" for documenting malnutrition among elderly patients. As a result, cases that formerly had been classified as kwashiorkor on Medicare billings now are billed as other forms of severe malnutrition, spokesman Edward Barrera wrote.

But a Medicare spokeswoman said the agency has not changed its guidelines regarding kwashiorkor. And the billing data for Prime hospitals does not show an increase in other forms of severe malnutrition – only the steep drop in kwashiorkor.

For example, in 2010, Shasta Regional Medical Center billed Medicare for treating 727 cases of kwashiorkor and 484 cases of other forms of severe malnutrition, the analysis shows. In 2011, it reported 106 cases of kwashiorkor. But the number of billings for other forms of severe malnutrition increased by six, to 490.

Prime is a chain of 20 hospitals that is based in San Bernardino County. In recent years, Prime hospitals have reported high rates of several unusual conditions that qualify for enhanced Medicare payouts, according to the data.